NFP Preview and the role of the dollar in market equations

NFP Preview and the role of the dollar in market equations
Analysis
Ahura Chalki
Author:
Ahura Chalki
Published on: 02.09.2021 20:17 (UTC)
Post reading time: 1.96 min
107

ADP Missed, Economic ease, and Covid Infection increase


The employment numbers that tomorrow we are waiting for, will be covering the data for a month by mid-August. That means that the slower recovery of the past two weeks will not be included in these numbers, which can be somehow positive for now. 

On the other hand, missing ADP numbers also can not be the reason for us to be a pessimist. In the last months, if we review the data and numbers, we can see that they already lost their correlation, so missing or not missing the ADP data, can not be the reason to wait for weaker employment numbers. Also, ADP company represents only one-fifth of the labor market.


First, let's see why the NFP results are much important than before for market participants. 


As Fed Chair, Mr. Powell mentioned in the last week's Jackson hole, employment numbers and Labor market data will play the main role in the next months for FED and FOMC members for their decision in the next months. After an amazing recovery in the first two quarters of 2021, the economic recovery pace in past weeks eased most economic indexes have been eased. Manufacturing activities, industrial production, and Service sectors all have been under pressure. Either they missed the expectation, or even if they were better than expectations, they were lower than previous numbers, however, still all of them are above growth and expansion zone, signaling that even if a bit slower, however, it is moving forward. 


So as the economic data shows some softness in economic activities, but good improvement, now we have to see the market reaction to the NFP data. 


A positive data and reaction mean hopping on earlier tapering, even in September or November. Depending on how the numbers can beat the expectation, will lift the US Dollar and cause a free fall in the US stock market in intraday charts. USD safe-haven demand will put it in a stronger position against its crosses. Gold in the first reaction can fall, but with time passing, Gold's safe haven also will have demand.


And weaker Job data means that as the FED chair emphasized, the labor market needs more support before reaching stability. This continues support will send the stock to the new highs and USD to the new lows!


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